El Salvador’s new bitcoin plan could cost money providers like Western Union and others $400 million a year, says President Bukele In 2020, El Salvador received nearly $6 billion in remittances, which accounted for about 23% of its gross domestic product. President Nayib Bukele estimates that money services providers like Western Union and MoneyGram will lose $400 million a year in commissions for remittances, thanks to the country’s bitcoin adoption. Some 70% of the Salvadoran population receives remittance payments. ............. “They have to take a bus to go to a physical location to pick it up, and there are gangs that hang out around those offices. They know what people are going there for, and they basically rob them” ....... Many in the 2.5 million Salvadoran diaspora send money to friends and family still living in El Salvador. Last year, they collectively transferred nearly $6 billion, or roughly 23% of the country’s gross domestic product, and a chunk of that went to the middlemen facilitating these international transfers. .......... The hassle around remittances is one chief reason El Salvador President Nayib Bukele cited for declaring bitcoin legal tender. As part of the rollout, the government has launched its own national virtual wallet — called “Chivo,” or Salvadoran slang for “cool” — which offers no-fee transactions and allows for quick cross-border payments. ....... Bukele is young, tech savvy, and a budding authoritarian. He has also tethered his political fate to the country’s bitcoin experiment, so he is pulling out all the stops to make it work. .......... One of those perks is offering $30 worth of free bitcoin to every Salvadoran inside the country who signs up for the Chivo wallet. That’s no small sum in a country where the monthly minimum wage is $365. ......... The average monthly remittance transfer is $195, and for the households that receive remittances, it makes up 50% of their total income. So the funneling of cash from abroad back home to El Salvador is critical to survival for most of the country. ........... Around 60% of that cash comes via remittance companies and 38% through banking institutions ........
if García wants to send $10 to his cousin in San Salvador, he will pay $3.24, or a nearly 33% commission to Western Union.
........... if García were to pay from a Chivo wallet, which is reserved for Salvadoran nationals living at home or abroad, the transaction would be free. ........... Once his cousin receives the funds, he can then go to any of the 200 new Chivo ATMs the government has rolled out and withdraw U.S. dollars from his virtual wallet. ......... “Wherever you are now, you can send bitcoin to anyone with a Chivo wallet in El Salvador, and in minutes, they have the value and then they can go to one of the ATMs and take it out in cash without a fee” ...........
“That’s drop-dead stunning. It’s an incredible humanitarian improvement.”
............. money service providers like Western Union and MoneyGram will lose $400 million a year in commissions for remittances should the population adopt bitcoin at scale ....... one of the most powerful features of the Chivo wallet is the fact that users can operate in either U.S. dollars or bitcoin. ......... “My guess is most people initially will cash bitcoin into U.S. dollars, as this is what they are used to, but we should see a gradual adoption of bitcoin as the main means of transaction and pricing. I see a future where consumer items like milk and bread are priced in bitcoin directly and people might even start holding bitcoin.” ............ Strike launched in El Salvador in March and soon became the most downloaded app in the country. Many have started to use the mobile payments app as a way to send and receive money from abroad. .......... between Strike and Chivo, a reckoning is underway for the current remittance system and its high fees. ........ “The whole concept behind bitcoin is the decentralization — the fact that individuals can take control of their financial health and their money.”
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